A personal loan can be used for various purposes including consolidation of debt, funding your wedding, or medical emergencies. You can consider taking a personal loan if you need the funds quickly without producing collaterals and multiple documents. However, if you don’t know much about personal loans, you might end up taking unnecessary debt which can lead to zero monthly savings and increased financial commitment.
Therefore, it is significant to understand both the pros and cons of a personal loan and decide accordingly. Keep reading to know more.
Pros of a personal loan
Here are a few benefits of personal loan to keep in mind:
Full Loan Amount Disbursal
Unlike home loans, a personal loan amount is disbursed to the borrower in its entirety in one go. Therefore, if you wish to use the loan amount for consolidating debt or funding a big expense, personal loans come in handy.
Most personal loan lenders offer instant approval or rejection for a loan application. Any other loan like a home loan or a car loan may take comparatively more time than a personal loan. Therefore, if you have a financial emergency, personal loan funds will be made available to you immediately. Make sure your documents and other eligibility parameters are in place to get the loan disbursed quickly.
Personal loans like Airtel Flexi Credit require minimum documents for processing a loan application. Your address proof, ID proof, and financial statements with salary slips can be more than enough to process a personal loan application.
No Collateral required
A personal loan is an unsecured loan i.e., it doesn’t require the applicant to present collateral as an assurance to get the loan approved. For example, a home loan keeps your home as collateral. If you are unable to pay off the loan, the home is put out for auction by the bank and the amount lent is recovered. A personal loan doesn’t have such a guarantee for the lenders.
Cons of a personal loan
A personal loan, even though instant and unsecured, has a few cons you should keep in mind:
Since personal loans are unsecured loans and the lenders don’t have a guarantee of recovering the loan amount, the interest rates are comparatively higher than other types of loans.
The lenders look very thoroughly into your financial background before approving a personal loan. Parameters like monthly salary, credit score, payment history, and more are taken into consideration for a personal loan.
High processing fees
Every lender charges a one-time loan processing fee. Personal loans (depending on the lender) might attract high processing fees and charges. Ask the lender more about the fees before taking out the loan. Mostly, the processing fee is deducted directly from the borrowed amount.
We hope the above pointers have helped you understand more about a personal loan. Only take out a personal loan if you really need the funds and can afford to pay back the monthly EMIs on time. A single missed payment can really affect your credit score in a big way. Also, go online and compare the interest rates and processing fees of various lenders to get the best offer for yourself.
You can get offers from over 3 lenders with Airtel Flexi Credit. You can apply for an Airtel Personal Loan online from the Airtel Thanks app. Just enter your basic details and wait for an instant update on your application. Good luck!